Europe Gas: Prices hit 6-months lows on China trade tariff retaliation
Dutch and British gas prices plunged to their lowest in over six months on Friday afternoon in line with sharp declines in oil and stock markets after China announced retaliatory tariffs on U.S. goods, fanning global recession fears.
The Dutch front-month contract was down 3.62 euros, or 9% at 35.86 euros per megawatt hour (MWh) or $11.63/mmBtu, by 1158 GMT, LSEG data showed.
Earlier the contract fell to 35.25 euros/MWh, the lowest since Sept. 23, 2024.
The British front-month contract was down 8.26 pence at 87.51 pence per therm.
The British day-ahead contract was down 8.28 pence at 87.50 p/therm.
Prices were already down in the morning but the fall accelerated after China announced additional tariffs of 34% on U.S. goods.
This saw stock markets extend losses incurred in earlier trading, while
oil prices
were headed to their lowest close since the midst of the coronavirus pandemic in 2021.
Whole markets were collapsing and nothing was trading based on fundamentals, a trader said, adding it was not even clear whether gas was included in the Chinese tariffs.
The markets were now showing "a massive re-calibration of where we see global growth", or rather the opposite, another trader added.
Major energy intensive industries may change future plans which could impact the amount of energy they need in the future, consultancy Auxilione said in a morning note referring to the initial U.S. announcement of global tariffs.
"Companies were already publicly discussing potential shut downs and reductions in output in response to the tariff announcement," they added.
The drop in European gas prices likely also reflected expectations of greater supply due to relatively higher tariffs on Chinese exports potentially diverting more LNG to Europe, said Daniel Hynes, senior commodities strategist at ANZ.
"Risks of weaker demand in China are also higher," he added.
Lower LNG demand in Asia in 2025 versus 2024 could have significant implications for Europe, despite its wider storage injection gap this year, analysts at Rabobank said in a note.
"With weak Asian LNG demand, Europe's gas benchmark price could drop to the low EUR 30s in 2025," they added, but maintained their forecast for prices in the low EUR 40s for now.
In the European carbon market, the benchmark contract was down 2.71 euros at 63.35 euros a metric ton, after briefly hitting 62.69 euros/t, its lowest level since November.
(Reporting by Nora Buli, Editing by Susanna Twidale)
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